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It’s 2 against 1, who will win?

5 · 02 · 22

Hey, it’s Mike Lynch with AmeriFirst financial and it’s time for your Monday morning mortgage update for the week of may. The second happy may hope you guys had a great weekend. It was awesome. Great weather cooler, full nights in Northern California. So a lot of pent up demand, I think. And we’ve been saying that for so long with all these events that are happening in 2022, but have a great weekend.

What w w what happened last week and what are we looking at for this week? So last week really ended the week flat. There really was no change in rates. We’ve had two weeks of this, and we’re in this flat pack. Hey all that’s going to change this week. We’ve got some big stuff on on the docket as far as things that can move the market.

And we’ll go through those. So what are three things that we’re going to talk about? We’re going to talk about the fed feds meeting this week. Jobs, big, big jobs week with a lot of reports coming out, and then a lot of global stuff, a lot of world events that are, that are impacting pricing.

So let’s talk about the fed. The Fed’s meeting again, Tuesday, they’ll end the meeting on Wednesday. Then they’ll come out with a presser that says, Hey, this is what’s happening. And so we’ll really focusing on two things that are going to move those mortgage rates this week. We’re looking at the interest rate hikes that are happening and what’s going to happen this week.

And then we’re looking at quantitative tightening. So let’s talk about interest rates hikes. We know that the. A couple of months ago raised the fed fund rate for the first time, really, since COVID hit us and they raised it a quarter percent and they need to do this, it’s been at zero. Now, it’s a quarter cent higher, and they’re going to do it again this week.

And they’re probably going to raise it at least a half a point. Heck, there’s some fed members that are saying they should raise it three quarters of a percentage point. So what’s that mean? Does that directly. Effect mortgage rates. We know that it doesn’t because mortgage rates are determined by the trading and mortgage backed securities in the bond market, not with the fed does with the fed funds rates, which is really what the media reports.

So that fed fund rate. W equity line rates, home equity, line rates, car loans credit card rates, but are also has a direct impact on the money. Businesses are charged when they borrow money and we know businesses need money to live. So that has an impact. And that means. Businesses are paying more to borrow money that cost is passed on the consumer.

And that just means everything costs more. So why is the fed doing this? Because it’s the primary way that they can fight inflation. They raise that fed fund rate. It costs more money to borrow money. We pay more for stuff in that slows our spending. So. Prices go up and we know inflation is causing prices to go up the higher costs businesses to borrow and for us to pay for stuff things more expensive.

We slower spending. It actually means that businesses turn around and reduce their prices. And that is how high interest rate hikes with the. Really slows down inflation. It’s a long-term process. The fed basically has drove us into this because last year they said inflation, wasn’t an issue and it is an issue.

So Wednesday they’re probably going to hike and a half a percent and that’s one issue, but they’re also going to tell us what are they going to do moving forward? Are they in the. Counting tomorrow’s meetings. We have six more meetings with the federal reserve. So if they’re going to raise that rate six more times, there’s some indications that the fed fund rate could be three, three and a half percent by the end of the year, that’s a big number.

So if you’re paying five and a half for home equity line, that rates going to go up to eight and a half, 9% by the end of the year for home equity line and other costs as well. So very, very impactful, but in the longterm. And the longterm, this fed raising this fed fund rate is good for rates for mortgage rates, for mortgage rates, because it’ll slow the economy down, maybe drive us into a recession, which we’ve been talking about, and that means mortgage rates come down.

The second thing that we’re looking at with the fed meeting is this quantitative tightening. So we know the Fed’s not dumping money in the bond market anymore. But they’re also not re they’re slowing down the reinvestment into the bond market, and that really can move rates up because it’s less money buying bonds, which causes.

Money out of the bond market and mortgage rates to go up. So the fed meeting is really the most impactful thing, and that will end on Wednesday. The second thing we’re looking at is jobs, big, big jobs week, a lot of jobs reports coming out, wage data unemployment data. So every single day, this week there’s a jobs number.

And as we see greater employment, lower unemployment, that’s better for the economy. And that typically drives rates up. So. Two things that we’re going to be looking at this week, the federal reserve and jobs numbers are really going to move rates to the worst. And then we got the third thing and that’s really what’s happening around the world.

That is kind of that opposite effect of, of what’s happening with the fed and the jobs. And this could move rates down, actually. We’ve got. A couple of big countries having their federal reserve, meeting Australia bank of England, they’re going to raise rates and this is just a pattern we’re seeing globally.

We’re also concerned about the China slowing down with their draconian keeping everybody inside because of the COVID virus and that slows production down that. We don’t get stuff. And if we don’t get stuff, we can’t make it prices go up because it’s low demand, low supply. And then Ukrainian, the Russia situation has not slowed down in any way, shape or form.

It’s actually escalated. That has an impact globally on many economies and that pushes rates down. If we look at what’s happening this week, we have more things happening that could drive those rates up, then move them down. And so as we start out the week, we start out the week actually locking, just float, locking into that fed meeting.

Cause we’ve got a lot of information that really could drive these rates up. So, if you need any information, any advice unlocking don’t hesitate to give me a call. If you know somebody that could benefit from this video, please forward it. If you have any comments, I’d love to hear them have an awesome week and we’ll talk to you soon.

Bye bye.

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